Factors Influencing Globalization Of Small And Medium Enterprises In Kenya: A Case of Selected SME’s In Nairobi

Abstract

The main purpose of this study was to establish factors affecting the globalization of small and medium enterprises in Nairobi, in the information technology (IT) trade industry. The study was guided by three objectives which include: to establish the influence of technology, financial resources and legal and regulatory framework on globalization of SMEs in the IT trade industry. This study used a descriptive research design in order to provide a description of the globalization in SMEs in the IT trade industry and how it is influenced by technology, financial resources and legal regulatory framework. The study population comprised of 103 SMEs operating in Nairobi in the IT trade industry. The SMEs managers were involved directly in responding to the study questionnaire. Stratified random sampling technique was used to select samples for the study; strata were constructed in regard to the zoning of market regions in Nairobi; this included, Nairobi CBD, Ngara and Muthurwa markets. The strata were allocated samples proportional to their population size and random sampling was used to select the study sample. A sample size of 60% of the total population (62 SMEs) was used in the study. Data was collected through structured questionnaire, and the analysis was done through descriptive and inferential statistics. Descriptive statistics included mean score and standard deviation, to measure the score of individual items on the Likert scale while inferential statistics included correlation and regression analysis to measure the relationship between the study variables. Data was presented in figures and tables. Findings on the background information show that the majority of the respondents were male; most of them were 22-35 years old. In addition, results show that most of the respondents, (67%) had had a bachelors’ degree. In addition, findings show that most of the businesses, (67%) had been running for 1-5 years. 81% of the businesses, were found to be solely owned. The majority of the SMEs, (67%) were operating regionally. Results also show that 67% of the SMEs, that had globalized did not consider globalization in their strategic plan and 33% of them had plans for globalization. Further, the findings show that SMEs had embraced globalization practices, and were involved in the movement of goods, capital, services and information across borders. They were also participating in the emerging market economies. Moreover, the findings show that the three factors; technology financial resources and legal and regulatory framework had positive significant correlation with globalization of SMEs, with r= 0.621, p<0.000, r= 0.821, p<0.001 and r= 0.677, p<0.000 respectively. The three independent variable accounted for 55.5% of globalization in SMEs among IT based SMEs. This study concluded that three factors of technology-financial resources and legal and regulatory framework-significantly influence the globalization of SMEs. Technology connects SMEs to the foreign markets through efficient communication. Financial resources enable SMEs to establish overseas offices and carry out recruitment for their foreign ventures. The legal and regulatory framework removes barriers and creates a conducive environment for business transactions which encourage globalization in SMEs. This study recommends that SMEs should embrace technology in their strategy for globalization. The government should invest to develop its technology infrastructure to expose SMEs to advanced technology. In addition, financial institution and government financial system should offer credit to SMEs to fund their globalization. In an effort to promote globalization in SMEs governments should establish friendly regulations. States should also relax some of the size based biased regulations on SMEs. Regulations should also be establish, to protect SMEs from being exploited in the international markets by multinational companies and other players.